Clean Vehicle Incentive Act
SECTION 1. This Act may be cited as the “Clean Vehicle Incentive Act.”
SECTION 2. The purpose of this Act is to repeal and replace section 4064 of the Internal Revenue Code of 1986 (commonly known as the “Gas Guzzler Tax”) so as to:
1. Eliminate the existing excise tax on passenger cars and light vans.
2. Establish a manufacturer tax credit of $1,000 for each new vehicle meeting clean-energy or small-engine standards (electric, hybrid, or gasoline engines no larger than 4.4 liter 4-cylinder).
3. Maintain a surcharge on all vehicles with a gross vehicle weight rating (GVWR) over 6,000 pounds that fail to meet the EPA’s combined fuel-economy threshold, with surcharges ranging from $1,000 up to $7,700 per vehicle.
SECTION 3. Effective for taxable years beginning on or after the date of enactment of this Act, section 4064 of the Internal Revenue Code of 1986 is hereby repealed.
SECTION 4. AMENDMENT TO TITLE 26, UNITED STATES CODE. (a) Insertion of New Section 4064. — Subchapter B of chapter 38 of subtitle D of the Internal Revenue Code of 1986 is amended by inserting after section 4063 the following new section:
§ 4064. Clean Vehicle Incentive Credit and Heavy-Vehicle Surcharge
(a) Clean Vehicle Incentive Credit.
(1) In general. — For each “qualified vehicle” manufactured and sold in a taxable year, the manufacturer shall be allowed a credit against the tax imposed by subtitle C (but not in excess of the manufacturer’s tax liability) in an amount equal to $1,000.
(2) Qualified vehicle. — A vehicle is a “qualified vehicle” under this subsection if and only if:
(A) it is classified as an “automobile” under section 4062(b)(1)(A) (i.e., a four-wheeled vehicle rated at 6,000 pounds unloaded gross vehicle weight or less); and
(B) it meets one of the following propulsion-system criteria:
(i) Powered solely by an electric motor drawing energy from onboard batteries (no internal-combustion engine); or
(ii) A hybrid electric vehicle whose electric-motor system can power the vehicle independently for at least 20 miles; or
(iii) Powered by a gasoline internal-combustion engine with displacement not exceeding 4.4 liters and having no more than four cylinders.
(3) Certification. The Administrator of the Environmental Protection Agency (EPA), in coordination with the Secretary of Transportation, shall issue regulations establishing procedures under which a manufacturer may certify that a given vehicle qualifies under paragraph (2). Such regulations shall include:
(A) criteria for verifying electric-drive capability or hybrid-drive capability;
(B) engine-displacement verification procedures for gasoline vehicles; and
(C) documentation requirements sufficient to prevent improper claims of the credit.
(4) Limitation on credit. A credit under paragraph (1) may be claimed only once with respect to each vehicle (i.e., the credit terminates upon the first sale to an end-user).
(5) Application of credit. The credit under this subsection shall be taken on the manufacturer’s quarterly estimated tax return under section 6075 or on the manufacturer’s annual income tax return, as the Secretary prescribes by regulation.
(b) Surcharge on Heavy Vehicles Failing Fuel-Economy Threshold.
(1) In general. For any vehicle with a gross vehicle weight rating exceeding 6,000 pounds that fails to meet the combined fuel-economy threshold established by the EPA, the manufacturer shall pay a surcharge in accordance with the schedule set forth in subsection (c).
(2) Threshold. The EPA shall continue to administer, under regulations substantially similar to those previously issued under section 4064(a), the combined fuel-economy threshold test for purposes of determining whether a heavy vehicle “fails to meet” such threshold.
(3) Collection. Any surcharge due under paragraph (1) shall be collected at the time the manufacturer certifies the vehicle’s failure, and shall be paid on the same schedule as the tax imposed under subsection (a) of section 4062 (i.e., at the time of sale or import).
(c) Surcharge Schedule.
The surcharge imposed under subsection (b)(1) for each heavy vehicle failing the EPA’s combined fuel-economy threshold is as follows:
Combined Fuel Economy (MPG) | Surcharge ($)
:------------------------------:|:-----------------:
Less than 20.0 | 7,700
20.0 – 20.9 | 6,900
21.0 – 21.9 | 6,200
22.0 – 22.4 | 5,500
22.5 – 22.9 | 4,900
23.0 – 23.4 | 4,300
23.5 – 23.9 | 3,800
24.0 – 24.4 | 3,300
24.5 – 24.9 | 2,900
25.0 – 25.4 | 2,500
25.5 – 25.9 | 2,100
26.0 – 26.4 | 1,800
26.5 – 26.9 | 1,500
27.0 – 27.4 | 1,200
27.5 – 27.9 | 1,000
Vehicles meeting 28.0 MPG or higher are not subject to a surcharge.
(d) Definitions. — For purposes of this section:
(1) Automobile and gross vehicle weight rating. — The terms “automobile” and “gross vehicle weight rating” have the meanings given in section 4062(b).
(2) Combined fuel-economy threshold. — The combined fuel economy standard for purposes of subsection (b) shall be the same as that established under regulations previously prescribed pursuant to section 4064(a)(1).
(3) Administrator. — The term “Administrator” means the Administrator of the Environmental Protection Agency.
(e) Effective Date. — This section shall apply to vehicles manufactured and sold after June 30, 2025.
SECTION 5. (a) Section 4062(b) of the Internal Revenue Code of 1986 is amended by striking “section 4064(a)” each place it appears and inserting “section 4064(b) (as in effect before repeal under section 3 of the Clean Vehicle Incentive Act)”. (b) Any cross-references to section 4064 in other provisions of subtitle D shall be treated as references to the corresponding provisions of this Act.
